How Is Central Asia Embracing Digital Currencies?

Central Asia might not be the first part of the world that comes to mind when you think of digital currency developments. Indeed, most would instinctively look further east, to countries like Japan, South Korea and (until recently) China to find entire nations gripped by bitcoin enthusiasm.

But as Initial Coin Offering (ICO) bans come into force in China and South Korea, and Japan begins on its own regulatory drive, investors elsewhere on the continent are wondering if they can take advantage of the East Asia digital currency hiccup – especially those in Central Asia.

Even though Central Asian digital currency interest remains fledgling for the most part, that could all change soon. Interest is intensifying fast in the region, and knowledge is deepening. As Central Asian governments begin playing an increasingly vital role, the region could be set to capitalize.

Kazakhstan at the fore

Leading the Central Asian digital currency charge is Kazakhstan, the biggest economy in the region. In fact, the Kazakh government has on numerous occasions publicly pledged its intention to lead the way when it comes making digital currency progress in the CIS.

The government has set up the fintech-focused Astana International Financial Center with a view to speed up the country’s digital currency and blockchain technology progress. With the likes of Deloitte, Waves, Juscutum and Kesarev Consulting all collaborating on projects at the center, bitcoin analysts the world over are starting to sit up and take notice.

Natalia Sheiko, a partner at Kesarev, said earlier this year, “Kazakhstan has become the second country in the world, after Japan, to recognize the need for the development of a cryptocurrency market system at the governmental level. The development of a digital currency market [at] the Astana International Financial Center is the first step towards a creation of a full-fledged ecosystem for the digital economy in Kazakhstan.”

Indeed, Kazakhstan’s bitcoin volume has spiked sharply in the second half of this year as the government drive begins to take effect, hitting a record high of almost 19 million in the third week of October.

Meanwhile, Kazakh startup Lendex will begin pre-ICO operations on December 1, with a full ICO crowd-sale to follow in 2018. This will finance a cross-border P2P lending platform for what the company calls “underbanked consumers” in both Central and Southeast Asia.

Mixed messages from Moscow?

Not everyone in the region is wholeheartedly onboard with digital currencies, however. Early last month, at a Moscow meeting of 20 international central banks with a strong Central Asian contingent in attendance, the mood was stark. Russia’s Central Bank issued an ominous statement warning of the nature of “serious concerns over the risks of digital currencies,” citing potential “money laundering and terrorism financing” as reasons. The hosts claimed the central banks present at the summit had arrived at a consensus on the matter.

As many Central Asian nations still follow Russia’s lead on a whole host of policy decisions, a total crackdown on digital currencies is not out of the question. However, there is plenty of evidence that would indicate than far from beginning a digital currency purge, Moscow is now bullishly fostering progress in the field.

Only a few months ago, Russia’s Central Bank began working on Masterchain, its own ethereum-based digital currency, in conjunction with some of the country’s leading fintech specialists.

Indeed, Russian president Vladimir Putin seems to be particularly keen on the idea of developing digital currencies, a particularly important fact considering Moscow’s scope of influence in in the CIS region.

Putin recently announced, “We should use the advantages provided by [digital currencies] in the banking sphere. It is certainly important, at the same time, not to create extra barriers. Conditions should be created instead for further growth and improvement of the national financial system.”

Beyond Astana?

It may take some time for bitcoin fever to spread outside Kazakhstan, which has been positively evangelistic in its approach to digital currencies. Many will instead choose to sit and wait to see how Kazakhstan and Russia fare with their ventures before wading in. But there are signs that a few proactive governments in the region are not content to sit on the fence any longer – and are instead looking to develop their own pilot schemes.

Azerbaijan is one such country, and is now mulling the potential virtues of launching its own digital currency. In May, a leading figure at the International Bank of Azerbaijan stated, “The government has all the necessary means to ensure reliable control and a high level of security for a crypto currency […] I believe that Azerbaijan, having become a locomotive in this sphere among the CIS countries, can introduce for example, AzCoin.”

In Georgia, meanwhile, conditions are ripe for digital currencies to make a big splash. The Georgian government and business world is already making giant strides in the blockchain sector, and has developed one of the most notable bitcoin mines in the world.

A government official from neighboring Armenia recently expressed his surprise at just how enthusiastic Georgians are about digital currencies, recounting, “I visited Georgia four to five months ago to see the bitcoin ‘farm.’ One bitcoin cost US$1200 when I was crossing the border, and it cost US$1290 when I was on my way back to Armenia in the evening.”

Early days

It may be too soon to jump to conclusions about Central Asia and digital currencies. Should Moscow decide to crack down on ICOs and introduce stricter regulations for exchange platforms, developments in the area could well come to a screeching halt.

That said, countries like Kazakhstan have just enough clout to go it alone when it comes to digital currencies – and Putin’s own enthusiasm for bitcoin, ehtereum and so on could prove contagious. As much governments in the Far East hum and haw about their fintech policies, their Central Asian counterparts – particularly those in Astana – are starting to make serious digital currency inroads.

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